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Our elected leaders on both sides of the political aisle are going to have a lot to say about President Obama’s proposed federal budget in the weeks and months ahead. But one area is likely to continue escaping attention in the wake of the proposal’s release: the availability of affordable rental housing.

The president’s budget request would increase funding for the Department of Housing and Urban Development – the agency tasked with providing American housing options and assisting community development – by $4 billion, or 8.7 percent, above current levels. The casual observer might assume the lion’s share of this increase will go to helping more Americans buy their own homes. On the contrary, the majority of the hike will go to fund programs that help renters afford to put a roof over their head.Continued…

There is a problem with the U.S. housing market that few are willing to admit.

The country is experiencing job growth, unemployment rates have dropped and hourly wages have started to increase for lower-income workers. The overall U.S. economy has mostly recovered from the 2007-2009 recession. The housing sector has not.

It’s time for a new conversation about U.S. housing policies.

The U.S. Department of Housing and Urban Development’s goal in 2015 is to increase homeownership rates. But, there is a distinct possibility that homeownership rates will never return to their pre-recession levels given the number of young Americans who either cannot or will not buy homes.Continued…

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The HUD Rental Assistance Demonstration (RAD) program is entering its second major phase with a full head of steam. The program’s initial cap of 60,000 units has tripled and now sits at 185,000. What’s more, the proposed 2015-16 federal budget would impose no limit at all on the program going forward.

The rising popularity of the program speaks to its effectiveness as a means of converting the public housing stock of this country to private ownership. The driver is the program’s design: Allowing existing subsidies the projects are receiving through housing authority budgets to be transferred to direct rent payments. This enables private investors to take part in recapitalizing and modernizing the rental housing inventory by partnering with PHAs. They can finance the improvements with market rate debt, Low Income Housing Tax Credits (LIHTC), and/or other state or local subsidies when they are made available.

In addition, the cost of that capital is particularly enticing. The market rate financing is most often insured with FHA multifamily mortgage insurance, which results in very low interest rates. This incentivizes investors to borrow as much as they can to maximize the repairs and improvements and boost their own returns.

This year, a higher level of attention has been brought to a group of Americans who deserve our appreciation but often don’t get the kind of thanks they truly need.

Throughout the country, veterans are struggling with issues few of us can fathom. Many face not only physical and mental challenges upon returning home from conflict, but pressing financial concerns as well. It may shock you to know that nearly 50,000 veterans across the United States are homeless.Continued…

Mark Dellonte, President and Chief Executive Officer of Love Funding, today applauded the U.S. Departments of Housing and Urban Development (HUD) and Veterans Affairs (VA) for awarding $62 million to help thousands of homeless veterans find permanent housing.

HUD today announced the department would grant $57 million to support 8,276 Tenant-Based Vouchers for privately-owned rental units, and $5 million for 730 Project-Based Vouchers (PBV) for existing newly constructed units in specific developments.Continued…

Many of us appreciate the role that affordable apartment properties play in providing housing to Virginians who wouldn’t otherwise be able to afford it, but few genuinely understand what goes into preserving those meaningful living quarters in the state’s affordable housing supply. It’s an information gap that needs to be closed soon: During the next five years, more than 25,000 affordable apartment units reserved for tenants with incomes at or below 60 percent of an area’s median income and financed by the Virginia Housing Development Authority (VHDA) will conclude their mandatory 15-year lockout period, the compliance period during which a property that received federal low-income housing tax credits (LIHTCs) must maintain a certain amount of affordable units. At that point, many owners may need to invest heavily to modernize their properties or sell them to offload the financial burden.Continued…

The Love Funding team recently gathered in Boston to celebrate our 30th anniversary and discuss plans for the company’s future. We enjoyed our time together and are proud of where we stand today as a top FHA lender; however, we recognize that our success means nothing without strong client relationships. So as a team, we put our heads together to identify measures to ensure that our clients keep coming back. We are streamlining internal processes, expediting underwriting procedures, simplifying loan documents and building out a loan portal to provide our clients with the very best in customer service.

We are also excited about the many changes happening at HUD, including a new 232 handbook to improve efficiency on the healthcare side and a detailed plan for the multifamily transformation. Stay tuned for more information, and in the meantime, let us know how we can better serve your needs.

Priced out or willing to sacrifice? Seniors are now more likely to want to retire in a big city, but less likely to be able to afford it.

It’s been known for some time that the baby boom will directly lead to an increase in the numbers of elderly residents in the United States. What still isn’t known for certain is where these seniors will want to live. Different theories are still being debated, including whether seniors will want to remain in the suburbs or join the urbanization movement, selling their homes and moving into big city high-rises with shops and public transportation nearby.

That is, assuming the seniors can even get into the city. Recently, the AARP (the American Association of Retired Persons) released a poll it conducted in 2013 with New York City seniors. According to the study, 35 percent of the 1.3 million soon-to-be seniors already say it’s extremely likely they will move out of New York City to retire. Another 29 percent said it’s “somewhat likely,” leaving only 34 percent saying they are sure they will remain in the Big Apple.

One of the big reasons to leave, the seniors said in the poll, is that they think they’ll be priced out of over 55+ rental housing. More than half of the seniors surveyed said they don’t believe that there will be enough affordable housing available by their retirement.

Many prognosticators think the great run in the apartment market is coming to an end. After performing incredibly well for the past four years,the tide is starting to turn against the marketplace.

Sweeping changes over the next two years are going to cause fundamentals in the market to weaken for the first time since 2009. Significant increases in construction activity, for example, are going to send a torrent of properties into the market over the next seven quarters. Of course, these changes won’t be uniform across the United States. So it’s critical to understand which markets are going to see the most challenges.Continued…

It’s a sure bet that the market-rate seniors housing pipeline will catch up to the retiring baby boom demand during the next two decades—supply usually follows abundant money—but what’s more uncertain is how the sector will fill the expected boom in need for affordable seniors living.

According to a recent housing survey from the MacArthur Foundation, more than 60 percent of respondents believe it will be very challenging for seniors to find affordable, quality housing when they need it. The survey was conducted in April by Hart Research Associates, with 1,355 adults and seniors contacted by phone. “The main message we gathered from this survey is that a majority of people don’t think the housing crisis is behind us,” says Rebecca Naser, senior vice president with Hart. “More than half of the respondents saying they had to make sacrifices to meet mortgage payments in the past three years. As they age, they believe it will get even tougher to find affordable housing.”Continued…

A St. Louis-based lender has secured a $7.49 million loan for Financial District Properties’ renovation of the landmark Union Arcade in downtown Davenport.

The loan’s closing was announced Friday by Love Funding, one of the nation’s leading providers of FHA multifamily, affordable and health care financing. The loan is part of the financing package for the $13.7 million project, which will convert the former office building into new housing.

Harry Cheatham, senior director of Love Funding’s St. Louis office, secured the loan through the U.S. Department of Housing and Urban Development, or HUD, insurance program for substantial rehabilitation and construction loans.

Declining housing affordability has received a lot of attention over the past few years, and deservedly so. We’ve seen rising home prices across the country continue to chip away at Americans’ ability to buy their own homes. Declining housing affordability has taken center stage in the national debate over whether it’s a wise move to unwind Fannie Mae and Freddie Mac, the government-sponsored enterprises that back 90 percent of U.S. mortgages.

But while this challenge is well understood, declining rental affordability hasn’t been as much of a hot-button issue. By 2020, more than one million apartment projects backed by low-income housing tax credits (LIHTCs) will come to the end of their compliance periods, making them eligible for a return to market-rate rents. This “LIHTC Ledge” threatens to exacerbate what is already a tenuous situation for the growing tide of renters who can’t find affordable accommodations.Continued…

Developers, owners, and lenders of multifamily projects financed with low-income housing tax credits (LIHTCs) recently received a major lift from the Department of Housing and Urban Development (HUD). The agency unveiled big changes to its LIHTC Pilot Program that are sure to allow more multifamily borrowers to avail themselves of HUD’s low rates and attractive terms.

A year and a half ago, HUD unveiled the program to test an accelerated approval process for the purchase or refinance of multifamily rental properties financed with LIHTCs. There was no mystery as to what motivated the agency: Part of HUD’s mission is to help preserve affordable housing solutions around the country, and it was facing the very real threat of more than 1 million LIHTC apartment projects leaving the affordable housing stock over the next decade as they come to the end of their compliance periods.Continued…

We are excited to see that Lucas Place Lofts is nearly finished! Love Funding provided $20.5 million in financing to convert this historic building into market-rate lofts. Check out this article published in the Kansas City Star…

In recent years, multifamily and health-care property developers have flocked to loan-insurance programs run by the U.S. Department of Housing and Urban Development (HUD) as traditional financing options first became scarce and then failed to rebound from pre-crisis levels.

In fact, in fiscal-year 2012, HUD endorsed 158 new construction or substantial-rehabilitation multifamily projects, totaling $2.33 billion in loan volume. In addition, the Office of Healthcare Programs received 716 applications in fiscal-year 2012, a dramatic increase from the 224 received in fiscal-year 2008. Overall loan commitments for both the health-care and multifamily loan programs have increased from less than $5 billion in fiscal-year 2008 to nearly $20 billion in fiscal-year 2012.

Despite these increases, the HUD underwriting process remains challenging for many borrowers. With thorough preparation, commercial mortgage brokers can avoid unpleasant surprises that often lead to delays in funding. With the knowledge of what underwriters look for in HUD loans, brokers can save clients the shock of seeing their deals derailed by unexpected requests.

For decades, HUD has served essentially as the lender of last resort for many multifamily and health-care property developers. But as more borrowers have become familiar with the benefits of Federal Housing Administration (FHA) financing, they continue to come back for more. Because FHA loans are backed by the government, their interest rates are highly competitive. HUD’s programs allow for fixed, long-term financing — as long as 40 years for new construction. The loans also are nonrecourse, meaning the lender only can pursue the collateral put up to recover the loan in the case of default; the government must make up the difference.

This last attribute makes the agency especially diligent when agreeing to back a new loan. Commercial mortgage brokers and borrowers who have gone through HUD loan processing know how rigorous HUD underwriting standards are. But many borrowers making use of these important programs today are first-timers. They approach a HUD loan transaction much like they would an application for traditional financing, and soon grow frustrated and disappointed when the lender’s underwriter starts peppering them with questions.

But these questions are a good sign that your lender is working hard to anticipate what HUD is likely to ask once the application is submitted. It’s better to tackle any issues the lender identifies before the application is submitted because there is a real risk that any delays could be prolonged if HUD is the one asking the questions and you’re unprepared to answer them. With many borrowers interested in HUD financing these days, there’s always another application waiting in the wings. Sometimes, applications can be sent to the back of the line if all of the information needed isn’t readily available, adding weeks — if not months — to the wait.

It is important to realize that some of these mistakes are entirely avoidable. Commercial mortgage brokers can help borrowers navigate these programs by keeping the following five points in mind. They also should be prepared to correct them before they needlessly jeopardize their transactions.

1. Inadequate plans

Architects by nature are fastidious when it comes to providing details, but they often come up short in the plans they submit to HUD, particularly in areas pertaining to plan format, square-footage calculations, architectural agreement and signature details. Many times, the information provided is in direct conflict with the agency’s specific needs. HUD has an entire handbook devoted to architectural requirements, but the pages to dog-ear are the ones dealing with the myriad issues regarding accessibility.

According to the guidelines of the Uniform Federal Accessibility Standards and the American with Disabilities Act, each multifamily property must have a dedicated number of units that are accessible to those with mobility disabilities, in addition to a separate percentage of units adapted for auditory and visual impairments. These details must be expressed in the architect’s plans and specifications. In addition, the Fair Housing Act’s guidelines require all ground-floor units in walk-up apartments and 100 percent of units in elevator buildings must comply with FHA standards. The law also requires HUD multifamily properties to have a dedicated number of units that can be adapted to address accessibility in the future. Architects who aren’t experienced with HUD don’t understand these rules, and their plans are returned when they don’t comply, adding more time to the process.

2. Environmental lapses

Lead-based paint, asbestos, radon gas — these are but a few of the environmental issues that HUD takes seriously when reviewing a new construction or substantial-rehabilitation loan application. But still commercial mortgage brokers and borrowers occasionally submit applications where no due-diligence work around these kinds of potential dangers has been performed.

The Federal Reserve’s recent decision to forestall tapering its bond-buying program has provided a temporary respite for affordable housing developers worried about rising rates. Despite lingering economic uncertainty, there is no question that the Fed will eventually take its foot off the gas pedal and allow interest rates to resume their climb higher. It’s just a matter of when.

For affordable housing developers and owners, rate increases are coming at an inopportune time. Over the next eight years, more than 1 million apartment projects backed by low-income housing tax credits (LIHTCs) could leave the affordable housing stock, according to the Department of Housing and Urban Development (HUD).

What is behind this? A large number of LIHTC properties that were financed over the past 15 years are coming to the end of their compliance periods. When that occurs, owners will have to decide whether to convert those properties into market-rate units or maintain them as affordable housing.Continued…

Commercial and multifamily mortgage origination volumes during the second quarter of 2013 rose 36% from the first quarter of 2013 and jumped 7% year-over-year, the Mortgage Bankers Association said.

“Commercial and multifamily mortgage lending and borrowing continued to grow during the second quarter,” said MBA Vice President of Commercial Real Estate Research Jamie Woodwell.

“The apartment market continues to be the belle of the ball, with multifamily mortgage originations running 31% ahead of last year’s first half total. And after a slow start to the year, lending by life insurance companies surged in the second quarter to record the highest quarterly volume on record for that sector,” added Woodwell.

When compared to the second quarter of 2013, the 7% overall increase in commercial lending volume was driven by an increase in originations for multifamily properties. The dollar volume of loans for multifamily properties rose 31%, while hotel properties were up only 3%. The dollar volume of loans for retail properties dropped 14%, while health care properties fell 36%. Office and industrial properties remained unchanged year-over-year.

Love Funding, one of the nation’s leading providers of FHA multifamily and healthcare financing, announced the closing of its first two transactions under a new HUD pilot program designed to expedite processing times for the acquisition or refinance of affordable rental apartments with Low Income Housing Tax Credits (LIHTCs).

Love Funding Senior Director James Vanar of the Los Angeles office used this new program to secure two loans totaling $21.7 million to fund the acquisition of Coral Wood Court Apartments in Reseda, CA and Orangewood Court Apartments in Sherman Oaks, CA. The buyer of the two properties was WNC & Associates, an Irvine-based firm that has been active in the affordable housing industry since 1971. The loans were underwritten by Love Funding Chief Underwriter Denise Troeschel, who has decades of experience underwriting affordable housing loans.Continued…

Federal Housing Administration (FHA) action in the affordable arena is rapidly gaining momentum as low interest rates snag the attention of borrowers looking for a great deal.

Rob Hoskins, chairman of developer The NuRock Cos., says FHA financing is definitely the choice of the moment for most owners and developers and that the agency is pushing affordable deals over anything else.

“It has, by far, the cheapest interest rate with the longest amortization schedule,” he says.Continued…

Many certification programs are available that add value to multifamily communities. By Carl Seville

Almost everyone involved in building or rehabilitating apartment buildings is aware, at some level, of the various green building certification programs available. But many may not be aware of just how important certification is and the value it can add to a multifamily property.

Understanding Certification and Its Benefits Although green certification programs define green building in slightly different ways, all include the following as either requirements or recommendations: energy efficiency, durability, indoor environmental quality, water efficiency, efficient use of materials and resources, waste reduction, sustainable site development, and walkable communities.

Energy Star, LEED, the National Green Building Standard, and other local and regional programs offer apartment owners many good reasons to certify their properties. For one, green certification provides very tangible benefits for both owners and residents. Owners can save money on construction costs and utilities, as well as maintenance and repairs over the life of the building, while tenants benefit from lower energy and water bills, quieter units, improved comfort, cleaner air, and a healthier indoor environment. Lower utility costs, in turn, can lead to easier tenant acquisition and better retention.Continued…

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Chicago-based Director David Hirsch will be attending the 2015 Illinois Governor’s Conference on Affordable Housing April 1-2, 2015 in Chicago, IL. Stop by our booth to meet David and discuss the various financing options available through FHA’s affordable housing finance programs. Interested in learning more about what’s next for the RAD Program? Join our Midwest Regional […]

Director Brian Jones will be attending the 2015 Kentucky Affordable Housing Conference April 8-9 in Lexington, KY. Look for Brian at our booth in the expo hall or join him at 10:15 AM on Thursday, April 9 as he speaks on the ‘Creative Financing for Multifamily Projects‘ panel.

Regional Director Bruce P. Gerhart will be exhibiting at the New York State Public Housing Authority Director’s Asociation Conference April 15-16 in Verona, NY. Stop by our booth to discuss Bruce’s extensive experience with HUD’s Rental Assistance Demonstration Program (RAD) and the many affordable housing financing options available through HUD.